Trends in the pre- and post-transfer rates of poverty which show the anti-poverty effectiveness of social security and of the major means-tested assistance program benefits.

Figure ECON 7. Poverty Rate of All Persons in Families with Related Children Under 18 Using Alternative Definitions of Income, 1979-1996

Note: The pre-transfer rate measures poverty in terms of cash income (only) before all transfers. The official rate measures it in terms of cash income plus social security and means-tested cash transfers. The post-transfer rate measures poverty after adding not only social security and means-tested cash transfers but also the market value of food and housing benefits plus taxes (including the refundable EITC as well as Federal payroll and income taxes); it does not include the fungible value of Medicare and Medicaid.

In all years reported, the pre-transfer poverty rate for families with related children under age18 was much higher than both the official poverty rate and the post-transfer poverty rate.

Table ECON 7 shows that the total effect of transfers and taxes was to reduce the poverty rate by 6.1 percentage points in 1972, 4.2 percentage points in 1983, and 6.7 percentage points in 1996.

Table ECON 7. Antipoverty Effectiveness of Cash and Near-Cash Transfers for All Persons in Families with Related Children Under 18, Selected Fiscal Years

1979

1983

1989

1993

1995

1996

Note: EITC denotes Earned Income Tax Credit. The pre-transfer rate measures poverty in terms of cash income (only) before all transfers. The official rate measures it in terms of cash income plus social security and means-tested cash transfers. The post-transfer rate measures poverty after adding not only social security and means-tested cash transfers but also the market value of food and housing benefits plus taxes (including the refundable EITC as well as Federal payroll and income taxes); it does not include the fungible value of Medicare and Medicaid.

Total Percent of Pre-Transfer Poor Removed from Poverty by All Transfers

36.6

19.1

23.9

28.9

35.2

34.1

Poverty Rate (in percent):

Cash Income Before Transfers (pre-transfer)

16.6

21.9

18.6

22.3

20.0

19.6

Plus Social Ins. (other than Social Security)

15.8

20.4

18.0

21.4

19.3

19.1

Plus Social Security

14.3

19.1

16.8

20.0

18.1

17.8

Plus Means-Tested Cash Transfers (official poverty rate)

12.9

18.4

15.8

18.7

16.8

16.6

Plus Food and Housing Benefits

10.2

16.5

13.6

16.4

14.3

14.4

Plus EITC, less Fed. Payroll & Income Taxes (post-trans.)

10.5

17.7

14.1

15.9

13.0

12.9

Total Reduction in Poverty Rate

6.1

4.2

4.5

6.4

7.0

6.7

Table ECON 7 shows that a substantial percentage of the poor population was removed from poverty by transfers in all years shown. The percentage of poor persons removed from poverty due to transfers was 37 percent in 1979, declining to 19 percent in 1983, and rising to 34 percent in 1996.

Table ECON 7 shows that the percentage of the poor population removed from poverty due to food and housing benefits is much larger in all reported years than the percentage removed due to other transfers. In 1996, more than 11 percent of the poor population was removed from poverty due to food and housing benefits.

Table ECON 7 also shows that whereas tax policies, including the EITC and Federal payroll and income taxes, did not remove any poor individuals from poverty in 1979, 1983, and 1989, the trend reversed in 1993. By 1996, EITC net of Federal payroll and income taxes removed about 8 percent of the poor population from poverty

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